Friday, January 26, 2018

Elizabeth Warren is faking it on healthcare

Delivering a keynote at Families USA's annual Health Action conference, Elizabeth Warren signaled either that she hasn't studied U.S. healthcare very closely or that she cares to attack only politically convenient targets on this front.

Warren lambasted the travesty that American families are one sickness away from financial ruin -- a major early discovery of hers - and that's great.  She excoriated the country's major private insurers as faithless partners in the Affordable Care Act, and that's fair enough (though the U.S. government has in turn been a faithless partner of the insurers). She suggested that those insurers who want the privilege of participating in the profitable Medicare Advantage and managed Medicaid markets should be required to participate in the ACA marketplace, and that's reasonable, at least in outline.

But she also presented the unaffordability of healthcare in the U.S., and the huge out-of-pocket costs that many insured Americans face, as purely a product of insurance industry rapine. Not a word about pricing-gouging by hospitals and doctors; the fine science of upcoding; the loopholes allowing self-dealing; the privileging of expensive procedures; the outsourcing to hedge fund- and private equity-backed price maximizers; the predatory balance billing. Providers got a total pass. I sentence Senator Warren to read Elisabeth Rosenthal's An American Sickness, which meticulously documents all these cost inflators and their evolution

Warren demands that private insurers be required to provide in all markets coverage at least as affordable and comprehensive as they provide in public programs. She contrasted the estimated 84% actuarial value of Medicare with an average AV of about 65% in the ACA marketplace (which is flat wrong, by the way, when you factor in the Cost Sharing Reduction accessed by more than half of marketplace enrollees.)  She did not mention that government essentially sets provider payment rates in Medicare and Medicaid, and that the ACA marketplace was not structured that way (why is beyond me).

Insurers are not innocent parties in U.S. healthcare dysfunction. They have little incentive, or mixed and uncertain incentives, to hold down provider rates, as their fixed cut (fixed by the ACA's requirement that loss ratios not go lower than 80% or 85%) grows as the overall cost of coverage grows. But the chief driver of unaffordable healthcare costs in the U.S. is the power of providers to price pretty nearly as they will. Warren won't tell us that.

Update, 3/27/18: As this speech foreshadowed, Warren's ACA 2.0 bill, released last week, excoriates insurers rhetorically but would create a market they should find favorable.


  1. I agree all the way with you. Our first task is to stop the gouging. If I may promote my own regulatory solutions....

    Besides, if insurance companies are such villains, how did they manage to lose so much money on the ACA exchanges?

  2. "the chief driver of unaffordable healthcare costs in the U.S. is the power of providers to price at will. Warren won't tell us that."

    Maybe Warren will not tell anyone that; but, I will. For the record, I altered XPostFactoid' last sentence of his post.